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Fortified by natural gas, chemical manufacturers and steel makers flex economic muscle

A barrage of experts from Wall Street, consulting firms and think tanks have reported on the enormous benefits that manufacturers derive from robust and reliable supplies of natural gas from shale. “Transformational for the U.S. economy,” a recent study by Mesirow Financial said of natural gas.

Chemical and plastics producers, as well as the steel industry, have emerged the major beneficiaries of abundant and affordable shale gas development.

At the recent Shale Gas Promises and Challenges conference in Cleveland, Kevin Swift, chief economist for the American Chemistry Council, described the development of natural gas from shale as the biggest development for chemical manufacturers in 70 years.

“It’s been a game changer,” Swift said.

Low-cost natural gas has led to reduced energy costs for most manufacturers. The chemical industry also uses natural gas for feedstock, enabling petrochemical companies to realize even greater savings and become much more competitive in the global marketplace.

As Crain’s Cleveland Business reported:

[quote]Mr. Swift predicted that the United States would have a big trade surplus in plastic resins by the end of the decade, going as far as to say he thinks the chemical surplus will be great enough to offset the country’s deficit in pharmaceuticals.[/quote]

A recent ACC study tallied almost 100 announced chemical and plastics projects totaling nearly $72 billion in potential new investment in the United States. The report found that half of the announced investments are from firms based outside the U.S.

Likewise, the foreign steel makers are also increasingly attracted to America, lured here by affordable natural gas. Voestalpine of Austria has announced plans to invest approximately $740 million in a new steel plant on the coast of Texas. It will produce 2 million tons of product annually.

Domestic steel companies such as U.S. Steel are also thriving, thanks to natural gas. According to The Financial Times:

[quote]The prospect that abundant supplies from shale will keep North American gas prices relatively low – well below their 2008 peak above $13 per million British thermal units – has encouraged steelmakers to look at building capacity in the United States.[/quote]

Nucor Corp, for example, is considering the construction of a plant in Louisiana. Ironically, the Nucor facility will be built on the site of an earlier plant torn down and shipped to Trinidad in 2003 because of high-priced natural gas, which had contributed to enormous job losses and the off-shoring of manufacturing during the last decade.

Aided and abetted by affordable natural gas, the manufacturing industry’s past woes are increasingly looking like ancient history.

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